ND Expert: Eurozone downgrade will have small impact

On Friday, Jan. 13, the Standard & Poor's Rating Services downgraded the triple-A ratings of nine European countries over concern of the Eurozone's ability to handle its continuing debt crisis.

But University of Notre Dame Finance Professor Jeffrey H. Bergstrand doesn't expect the move will have a big impact on the financial markets.

“The S&P credit downgrades of the nine eurozone countries will have a small, and varied, impact on interest rates among the nine countries," says Bergstrand, one of the world’s top experts in international trade and the international economy. "Many of the anticipated downgrades – such as France, Italy and Spain – will have little net impact next week on interest rates in markets of these countries, because most of this information was anticipated. Some of the lesser anticipated cuts will have larger impacts on their interest rates.

"The varying increases in interest rates among Eurozone members during 2011 implies that some countries will escape recession in 2012, but some will likely have a recession – or are already in one. The prospects for growth in the Eurozone overall in 2012 are quite muted.”

Bergstrand has been a finance professor in the Mendoza College of
Business for more than 25 years, as well as a fellow of Notre Dame’s Kellogg
Institute for International Studies, and a research associate of CESifo, an
international network of researchers based in Europe. His research on
international trade flows, free trade agreements, foreign direct investment,
multinational firms, and exchange rates has been published in more than 50
articles in such journals as the American Economic Review and as
chapters in books. Bergstrand also served as Co-Editor of the Review of
International Economics from 1996-2003 and remains on its editorial board.

He has been a visiting scholar at the European Commission in Brussels, the IFO
Institute/University of Munich, ETH University in Zurich, and several other
institutions. Bergstrand’s current research focuses on economic determinants of
multinational firm behavior and foreign direct investment and on the causes and
consequences of the growth of regional economic integration agreements. He has
also advised the European Commission on the effects of EU-U.S. nontariff
barriers and of EU free trade agreements on their trade flows.